The US Supreme Court has issued a ruling regarding Nvidia’s “deceptive” revenue disclosure for crypto mining
The US Supreme Court has elected to examine a case concerning the crypto mining revenue of tech company Nvidia Corp., a decision that could have a substantial impact on shareholder litigation.
Nvidia is attempting to dismiss an investor lawsuit that alleges the company was “deceptive” about its reliance on crypto mining revenue prior to a 2018 market downturn, according to Bloomberg.
Whether the lawsuit is sufficiently specific will be determined by the court’s decision. If the decision is in Nvidia’s favor, it could provide companies with the ability to dismiss shareholder suits at an early stage, potentially preventing costly litigation.
In the current Nvidia case, shareholders contend that the company’s CEO, Jensen Huang, failed to disclose that the unprecedented revenue growth in 2017 and 2018 was predominantly the result of crypto mining-related sales of the flagship GeForce GPU product, rather than gaming sales.
Nvidia’s shareholders contend that the crypto market’s volatility resulted in a greater degree of risk than expected. Nvidia’s stock experienced a more than 28% decline in the course of two days in November 2018, following the announcement of a revenue shortfall. Huang attributed the decline to a “crypto headache.”
The investors further assert that analysts promptly identified an alleged “discrepancy” between the actuality of the situation and Nvidia’s previous statements, which downplayed the significance of mining-related demand.
They contend that the genuine extent of GPU sales to cryptocurrency miners would be disclosed through internal communications involving Nvidia’s CEO.
The 9th US Circuit Court of Appeals in San Francisco rejected Nvidia’s argument for dismissal and determined that the shareholders’ lawsuit could proceed.
Nevertheless, Nvidia filed an appeal against the ruling, citing the absence of internal company documents that substantiated the assertion that officials were aware of making “misleading statements.”
Assume that the Supreme Court supports the technology company and establishes a more stringent standard for shareholder litigation. In that scenario, businesses may find it more convenient to obtain early dismissals of such cases, which would prevent them from incurring the substantial expenses associated with constructing comprehensive defenses.
This result has the potential to alter the dynamics of shareholder litigation, thereby affecting the level of accountability that companies are required to maintain in relation to their public statements and disclosures.
The crypto market’s total valuation, which peaked at $2.7 trillion in mid-March, is currently at $2.3 trillion. Despite the expectation that significant catalysts would rekindle the previous upward trend in the prices of major cryptocurrencies, they have not yet materialized.
For example, Bitcoin (BTC) has fluctuated between $56,000 and $71,000 in the past two months. An abortive attempt to retest its all-time peak of $73,700 has resulted in a current valuation of $65,000.
